Kroger Investors Shrug Off Lower Guidance

Kroger Co. (NYSE: KR) reported its fiscal third-quarter financial results before the markets opened on Thursday. The company said that it had $0.41 in earnings per share (EPS) and $26.56 billion in revenue. The consensus estimates from Thomson Reuters had called for $0.41 in EPS and revenue of $26.34 billion. In the same period of last year, it posted EPS of $0.43 and $25.07 billion in revenue.

Total sales, excluding fuel, increased 7.1% in the third quarter compared to the same period last year. Total supermarket sales, excluding fuel and Roundy’s, increased 1.6% in the third quarter compared to the same period last year.

In terms of guidance for this fiscal year, the company expects guidance to be in the range of $2.10 to $2.15, down from the previous range of $2.10 to $2.20. The consensus estimates are $2.13 in EPS and $115.21 billion in revenue for this fiscal year.

During this quarter, the company repurchased $1.4 billion in common shares and returned $418 million to investors in the form of dividends. Other major cash outflows were the merger with Roundy’s for $866 million and the merger with ModernHealth for roughly $390 million. On the books, Kroger’s cash and temporary cash investments totaled $374 million at the end of the quarter, versus $274 million in the same period from last year.

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Rodney McMullen, chairman and CEO, commented:

I am proud of our associates for continuing to connect with our customers in a difficult operating environment. Deflation persisted as we expected during the quarter. We are firmly focused on our long-term strategy of improving our connection with customers and associates, and continue working on process changes to lower costs. We don’t change our strategy based on quarterly swings in results. We remain committed to delivering on our long-term earnings per share growth rate guidance.

After opening more than 3% lower on Thursday, shares of Kroger traded up fractionally to $32.50 shortly thereafter, with a consensus analyst price target of $35.91 and a 52-week trading range of $28.71 to $42.75.

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